The almost unprecedented demise of Philippine Airlines (PAL) has left the country's domestic carriers scrambling to find additional capacity to fill the void, while creditors and bargain hunters are beating a path to Manila to pick over the bones of the defunct flag carrier.

The decision by PAL chairman and 67% shareholder Lucio Tan finally to pull the plug on the loss-making national carrier after the failure of make or break talks with unions leaves three struggling domestic operators with just nine narrowbody jets to serve the entire archipelago. Carriers such as Cathay Pacific Airways and Singapore Airlines now have a monopoly on international routes to Manila.

Philippine President Joseph Estrada, in an emergency round-table meeting with Air Philippines, Cebu Pacific Air and GrandAir, has called on the three carriers to put on extra capacity. Before a pilot walkout in June, which marked the start of PAL's latest and final troubles, the airline commanded an 84% share of the domestic market.

"The President has directed that we take nine Fokker 50s from PAL to fill the gap and we're now talking to the lessor," says Air Philippines president Augustus Paiso. He plans to recruit crews from the among the 8,500 ex- PAL staff and acquire a third leased Boeing MD-88 from U-Land of Taiwan. The carrier is also working to put back in service four Boeing 737-200s and two NAMC YS-11 turboprops, grounded after an earlier Civil Aeronautics Board (CAB) safety audit. In July, an application was filed by Air Philippines to launch regional services to Hong Kong, Japan, South Korea and Taiwan. "We might now try to fast track this," says Paiso.

Cebu Pacific is planning to acquire a McDonnell Douglas DC-9 from Air Canada in mid-October, to supplement the seven in use, and is looking for another three aircraft, "preferably more DC-9s or wet leased Airbus A300B4s", says senior advisor Ron Ridgeway, but he warns: "You can't produce pilots and jets overnight."

GrandAir, which has been repeatedly grounded for safety violations and because of unpaid bills, is hoping to get its two 737-200s flying again and is seeking another five -200s, subject to financing.

Gaining extra capacity from PAL's 54-strong grounded fleet is complicated by the fact that it owns few of the aircraft, and its assets only just cover debts of $2.1 billion. Of this, $1.2 billion is owed to European Credit Agency on eight Airbus A330-300s and eight A340-200/300s. The US EximBank is owed $400 million on four Boeing 747-400s - two of which were seized outside the country after PAL's 23 September shutdown. Locally based assets are protected from seizure until 20 November.

PAL owes another $260 million to a consortium of local banks. Of the airline's remaining aircraft, two Airbus A320s are owned by Marubeni and third by KFW, four of its eight A300B4s belong to Airbus, seven of its eight 737-300s are leased, as are all three 747-200s.

The airline says it has had approaches from Evergreen, Lufthansa, Northwest, Singapore Airlines and Swire Pacific to acquire businesses, such as catering and maintenance.

At the same time there are reports of moves afoot to pull together a management team to try and resurrect the airline.

Source: Flight International